Broadband for rural America is a topic that’s getting a lot of attention nationally. While this is an exciting frontier for electric cooperatives—particularly those considering getting involved directly in bridging the digital divide—there are important legal issues to weigh before heading in the direction of broadband.
Some key questions to ask are:
- Is engaging in the broadband business or owning an entity engaged in the broadband business a permitted “purpose” or “power” under your state’s electric cooperative act?
- Do your electric cooperative’s easements permit leasing or selling excess fiber-optic line capacity (in addition to using the line for internal communications)? And, if they do not, what would the applicable damages be, if any?
- If your electric cooperative engages in the broadband business, or owns an entity engaged in the broadband business, must the cooperative provide access to its poles and lines to broadband competitors under the anti-trust essential facility doctrine?
- Is leasing or selling excess fiber-optic line capacity a “qualified pole rental” and excluded from the 85 percent member income test? Is it unrelated business income?
- If your electric cooperative engages in the broadband business, or owns an entity engaged in the broadband business, is the cooperative taking appropriate steps to avoid cross-subsidization between the electric, broadband, and other business lines?
This list is not exhaustive. Legal considerations will vary by state and by the business structure used to provide broadband. Cooperatives are encouraged to consult with their attorneys and tax professionals on these issues.
See more on broadband due diligence.